As we said back in March, when Bitcoin's parabolic rise first started, it was only a matter of time before first one, then all central banks take on Bitcoin for the simple fact that it present too great a threat to the fiat system. Sure enough, on the chart below of BTC China it is quite clear just at what point overnight the People's Bank of China announced that Bitcoin is simply a virtual commodity and "isn't a currency with any real meaning" (paraphrasing Alan Greenspan), and that it officially bans financial companies from Bitcoin transactions.

However, the reason why Chinese Bitcoin didn't tumble all the way to zero is because the PBOC added a loophole that the public is free to participate in internet transactions provided they bear their own risks.

The Chinese regulators noted three main risks. First, they said Bitcoin was an unsafe investment because the amount in circulation is small and can be easily controlled by speculators, making it highly volatile.

Second, because it is a largely anonymous product with few controls on it, they said that Bitcoin makes money laundering easy and can be used to support terrorism.

Third, they said there was a risk that it could be used by criminal organisations, noting that Bitcoin had been used internationally for the purchase of drugs and weapons.

“We have clearly stipulated that at the present moment all financial institutions and payment institutions cannot develop any business related to Bitcoin,” the central bank said. The regulators said that any websites serving as platforms for Bitcoin transactions would have to provide detailed information about their users and report any suspicious activity.

The central bank said it would continue to monitor Bitcoin trends and risks, adding that it would also focus on educating the public. “We will guide people to correctly understand the concept of a currency as well as investment theory,” it said.

However, as noted, the ban was not outright, and the PBOC did allow an option for continuing the use of Bitcoin. That said, with increasingly more central banks rejecting BTC and outright warning about its usage, one can expect that the main draw of Bitcoin, its independence from the legacy fiat system, will be increasingly more scrutizinied until it too is institutionalized, or until the BIS creates its own Bitcoin slamdown trading desk.

The Chinese government stopped short of banning Bitcoin altogether, saying that as an online product people were free to buy and sell it at their own risk. But it highlighted many dangers associated with it, including money laundering and criminality. From a systemic perspective, it noted that the one saving grace was that the amount circulating in the economy was too limited to pose a real threat.

“Although there are people calling it a ‘currency’, it is not issued by the monetary authority, it does not possess the attributes of a currency such as legal repayment and enforcement abilities,” the central bank said in a statement explaining the notice.

“Judged by its nature, Bitcoin is one particular kind of a virtual product. It does not have the legal status of a currency, and it cannot and moreover should not be allowed to circulate in the market as a currency.”

About a third of global Bitcoin transactions have been taking place in China and BTCChina became the world’s biggest bitcoin exchange by trading volume last month.

No major financial institutions have yet been involved in the Bitcoin trade in China, but online vendors on ecommerce group Alibaba’s platforms have started using it, as has Baidu, the internet search engine leader.

So that's that. Next, we hope to provide shortly the latest monthly total gold import number by China, where the PBOC has yet to provide an update of its total holdings since 2009.

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I actually thought the move was rational on the PBOC's part. At least they extol the virtue of not being a reckless gambler on their banking system. They will also be funding new "education camps" to inform the public just what a real currency is.... money by force!

Wern't the Chinese the ones with 1/2 the investment in this lastest and greatest ponzi. You can't profit from a ponzi unless you can raise money somehow, and then take profit when the time arrives. You will play round robin with this coin as 3 or so big players take profit ramdomly as the Indians contribute slowly and steadly to build the new and exciting ponzi. This ponzi will stay in it's infint stage until it runs out of time and goes away.

Most Chinese don't believe Bitcoin, numerous criticism on Chinese Web. only less than 500,000 people invest in. (compare to 1.3 billion population). about 80% are young guy who dream that one day become billionaire by investing bitcoins. no house wifes involved

....and since that time the deflationary tiger has doubled and tripled how many times (all of which I predicted)?

So you admit I was right then? Here's another prediction for you that you can quote. As Bitcoin spreads it will continue to increase in value and will cause a panic out of fiat currencies. Nobody will be laughing or treat this as a joking issue as governments try unsuccessfully to crack down on a phantom blackhole that tears your world apart.

seriously? you gonna play it that way? i despise shills with the best of them, but really.... i had more hope for you hedge.... admitting someone is correct with in a certain context is not defeat, plus it is the right thing to do.... over the long run - you are correct, but you are also skirting the issue and seeming very evasive with your response.... give fonestar his pound of flesh for some of his predictions have been quite accurate... how he derived those predictions is another story... but being right is being right no matter how unfortunate it is

Meanwhile, in the world of real currencies, JPM bought another 238,900 ounces of gold yesterday at the CRIMEX. This would more than double their current registered inventory. They also continue to buy silver, in sharp contrast to the constant selling they've been doing for the past couple of years or so.

But what's even more interesting is that HSBC was called to deliver 221,600 ounces, and they only have 80,257 ounces registered. I wonder how that's going to work out for them?

And so it begins.... The attack on nerd money......Fonestar will still survive as he all his fellow bitcoinites can live on bitcoin alone...no need for cash exchanges, businesses who can accept btc..... PS..... Did u hear about the guy that stole 100 million in btc... You can watch the theft live here...

Unfortunately Fiat will not go away. I am dead center middle class. About 53% of my production is taxed. Taxes need to be paid in fiat. To kill BC they only need to tax a little more. Unless, they collect taxes in the form of BC.

Not the end of btc ... But the end of the poor guy who got 100 million in btc stolen with no recourse or chance in hell to get them back..... But as far as youre concerned btc is still the greatest way to pay, save, invest? Just cross your fingers and hope crypto-nerd doesnt crack your password...no thanks

Speaking of logic... why will/should bitcoin be worth anything over other crypto currencies that are vertually just as viable. Early adoption is certainly worthy as an argument, just not as the only argument...

The free-market will hash this out but it will be winner-take-all. Merchants are not going to support 50 currencies with 50 pay buttons, 50 wallets and 50 exchange rates. It will be troublesome enough for a merchant to support 1 crypto-currency and they will support the one with the largest customer base.

Miners, who provide security to the network, will apply their computer power to most attractive currency. The weak currencies will be and have been attacked.

Bitcoin is not a currency – and as long as it lacks the fundamental qualities that define a currency it will not be one. It is, at best, a digital commodity much like World of Warcraft gold. Currencies must:.....1) Be a store of value. That is, if I put some amount of value into it today that value should be reasonably stable over time. Nothing that is fluctuating in purchasing power by +/- 5%, 10% or even 20% in a day can be said to have such a quality, irrespective of whether it is going up or down. BTC fails this test.

2) Be a medium of exchange. In order to perform this function people must accept it in trade for other goods and services – real goods and services. You need to be able to buy a gallon of gasoline, a basket of food, a car, a computer and similar with it. The problem is that until it is a store of value it will not be a medium of exchange because the people who produce things would be insane to widely accept it when they cannot reasonably expect the value you give them to be constant for enough time for them to obtain more raw materials and similar with what you tendered to them. BTC currently fails this test.

3) Self-verifying, at least for reasonably-small transactions. You should be able to know if the “coin” you intend to spend is valid (and not a counterfeit) by trivial examination. This is almost-impossible with digital currencies since one of the largest risks is that you can theoretically spend them more than once, but only the first such spend is valid. A credit or debit card partially solves this problem via central clearing where serialization takes place. A decentralized currency attempts to solve this by publication, but that requires a fair bit of time to insure that your “spend” is not duplicated. For face-to-face transactions any sort of “online” requirement presents a material problem and for small but frequent transactions any sort of delay is unacceptable. The credit card industry solved the “online” problem decades ago through the use of paper transaction imprints and receipts; there is no similar way to resolve that problem for purely digital currencies. BTC currently fails this test.

Okay. Enough with reasoning with the dull witted. Maybe a 9 year old can reach them:

Designed to be scarce their worth alone beats every record we've knownA SHA for each block that's how miners roll and the blockchain goes on and on

'Toshi got this program penned to solve the problem of double spendsProof of work with all that hashmaking us some digital cashMiners stack to save our spends share their answers with all their friendsSilicon brains write chains of blocks while Keynes can't refrain from throwing rocksSo all you fools shorting 'toshi,bugs and statists with your glasses rosey,when the world finds out we can't inflateYou'll join this party fashionably late

Please refute any of my three points, which can be found in any ECON 101 textbook re: currencies, as https://en.bitcoin.it/wiki/Myths fails to address any of the three I mentioned.

What I see here is 'psychology of previous investment' at work. I'm not blind to BTC's value as a tradeable commodity, which is exactly what it is today, what I am saying is it does not meet these fundamental criteria to be considered a fungible currency (aka "money"), at present. It may at some point in the future, but not now.

BEIJING, Nov. 16 (Xinhua) -- China's central bank has threatened to step into a debate on a "virtual currency" issued by an Internet firm and bring it under government supervision.

The currency is the Q-coin issued by Tencent, a leading Internet community operator, for the users of QQ, an on-line chat room that had 220 million users by March.

It can be purchased with bank cards, telephone cards or QQ cards at an official price of one yuan (12.5 U.S. cents) and was originally intended to be used in buying on-line services providedby Tencent, including electronic greeting cards, cartoon portraits,chips in on-line QQ games and anti-virus software.

But many people have begun paying Q-coins when trading among themselves and in buying commodities and services provided by other websites.

The operators of some Internet forums reportedly receive Q-coins as their wages.

There have been reports that some people earned thousands of yuan per month by selling Q-coins won in on-line QQ games, where 10,000 points can be changed into one Q-coin.

The People's Bank of China (PBOC) said it would closely monitor the "virtual money", amid concerns that it may impact China's currency if it was left uncontrolled.

The bank would put the Q-coin, a kind of popular "virtual money", under supervision if it entered into circulation, sources with the PBOC told Xinhua.

However, Yu Guofu, a counselor with the Internet Society of China, dismissed the fears, saying the Q-coin was only a commodity,not a real currency that can be converted into the yuan.

It was worthless for people who were not QQ users, Yu argued.

Li Chong, a professor of finance with the Beijing Normal University, even denied the Q-coin is "virtual money" because it is "neither a medium of exchange nor a store of value".

However, legal expert Zhao Fujun argued that speculators who bought large amounts of Q-coins at a low price and resold at a profit had made the "virtual money" circulate like a hard currency.

Tencent said it would crack down on illegal sales of Q-coins in conjunction with the police, according to a report in the Beijing News.

Yang Tao, a legal scholar, pointed out that as China's legal tender, the yuan must be offered in payment of any debt and only the central bank could issue money.

Conversion between the Q-coin and the yuan, if unchecked, would lead to dire economic consequences, warned Yang.

"Virtual money" could disorder China's financial markets by taking the place of the legal tender as an "on-line medium of exchange", he said.

As the Q-coin was issued by an enterprise, not the central bank,the supply was not subject to the country's monetary policy and could cause the policy to fail, said Yang.

However, analysts believe the Q-coin is unlikely to enter into circulation because once it is made convertible with the yuan, Tencent would be exposed to great risks, especially if there is a malicious drawing.

No company would run the risk just to become a "virtual central bank", said a commentary in the Shanghai Securities News.

Yu said inflation occurred only when money supply exceeded the value of available goods and services, but "the supply of the Q-coin is based on the amount people purchase, which is unrelated to the country's financial system".

The sales volume of "virtual money" are estimated at billions of yuan every year in China and growing at an annual average rate of 15 to 20 percent.

Apparently they were wrong about the virtual bank part aka the exchanges which in essence act as defacto banks commodity or currency as long as crypto-currency is convertable to Central Bank funny money. And to counter PP I would say Chinese people did very much so believe in virtual currency based on those numbers. And this was a good 7 years ago.

They actually managed to come up with a dumber idea than an EMP killing Bitcoin (I didn't think it was possible)! Get this, now Satoshi is going to come back and sue the world for copyright infringement!!!

How many fake Libertarians like Schiff, North, Duane, Denninger, Still.. ad nauseum, got the message their number is up, time to throw careers and reputations under the bus to join the bankers war against bitcoin? Throw in the internet trolls, and mind-controlled slaves of the Debt and Death paradigm for a great FUD bash.

I will, I just got excited since I grabed more coins in this mess... :)

got in under $1 and ive seen it all, hate, love, fear, whatever toward btc... it stayed the same... hyperdeflationary - if you disregard that, you loose money, money is what market says, not what some communist cb says....

"However, the reason why Chinese Bitcoin didn't tumble all the way to zero is because the PBOC added a loophole that the public is free to participate in internet transactions provided they bear their own risks."

is free to participate in internet transactions provided they bear their own risks.

And that is the real story here. they don't want people bitching and whining looking to them to bail them out if they lose their shirts. Plus if they banned in on that grounds then they'd have to ban things like paypal all other forms digital script like amazon coins. That would go over like a loud fart in church on a Sunday morning. There is no realistic way to stop it. Only discourage the zombies from having any signs of hope or wanting to use it.

Crap! I have yet not received any bitcoins to spend on peace loving war efforts or quantitative easing to help the bitcoin economy back on its feet. I guess there is still some value left ni bitcoin then.

Honestly speaking I don't want bitcoin to fail, as I am on the side of free choice. What I realy want is to see that it is stable first, transparent and have proven record that it is secure and the price is stabilized. Then I can put some money for preservation.

However, you cannot blame me or anybody else for skepticism, as governments have proven again and again that they do not like competition. Besides, what can be coded by men, can as well be decoded by smarter men or by coopting or threatening while one of the smartest users is in the hands of the feds.

All in all, I hope that you guys make money while you can, but it may be at the expense of others and not necessarily the governments.

Oracle, can we come back in a year so you'll eat your words? Pretty please? Bitcoin has been declared "dead" so many times, and has persisted through each of those foolish proclamations enough to make the most seasoned investor take notice.

But you know what, you guys would just rationalize that billionaires being involved, VCs, etc.. were just the "stupid ones". Love the one-way street you have here, did you pave it yourself?

For now the profit is sitting in fiat waiting to see the market's next move. Will probably slam it back to BTC if I get a feel of an upward draft. As the consequence of the trades I am neither up nor down a satoshi.

The comments of you bitcoin sour grapers are pretty ironic, given what has happened in gold and silver, and the comments people made about gold and silver during their bull run. Every little dip people would say EXACTLY this kind of shit.

I'm sure there were people who thought real estate in the New World was a fad too, but people just kept going over there, to the point where people thought for generations that the price of real estate only goes up.

Bitcoin and PMs are complimentary. One increases the value of the other.

But hey, if you want to fight hard to keep the Fed and central banks in control of transactional currencies, I guess that's your business.

<<the bc holders>> are like a herd of cats, you can't generalize them much. It was pretty easy to spot the downward break in price today, roll on over to reddit for some news... yep, looks like news... sell some coins at $1,200 pick them back up at $900. Pretty much a no brainer. The depth of the market is wimpy compared to gold or stocks ($12b market cap), so price movement is amplified, for now. Back trading near $1,100.

I agree. note the "...focus on educating the public. “We will guide people to correctly understand the concept of a currency as well as investment theory,” it said." The Dutch National Bank's focus was on "be careful, you are on your own and you will not be bailed out - as in IceSave"

Bitcoin has four main characteristics: no central issuer, limited quantity, no geographical limits and anonymity. Although it is called money, it is not issued by a monetary authority, it does not have the status of legal tender and obliged payment status of money, it is not money in the true sense. Bitcoin is a specified virtual commodity, it does not have equal legal status with money, and it cannot and should not be used as money on the market.

~~~~

Chinese banks are told to stay away (good!), BTCChina exchange allowed to stay in business but implement KYC/AML. BTC receives, at minimum, "commodity" status... like gold.

That's the worst thing central bankers could do, get people thinking about it, because people would figure out what their central bank currency really is.

Best thing they can do is keep quiet about it. Don't say anything. Keep people in their sheep ignorance.

By the way, central bank currency isn't worthless. When someone accepts it in payment for their labor, it represents the value of that person's labor, so it's not worthless. It has no intrinsic value, but it has value as a medium of exchange, just like a bus token or casino chip, no intrinsic value, but value as a medium of exchange. In that sense, a bus token is a currency, a casino chip is a currency. It has value if someone will accept it as payment, even if it has no intrinsic value.

Bitcoin is like a bus token or casino chip. No intrinsic value, but value as a medium of exchange if someone will accept it as payment, which makes it a currency in the same way a bus token or casino chip is a currency. But it has charcateristics closer to company stock shares or bonds, limited number, unique individual identification (serial number).

T he reason that a fiscal conservative is conservative; that is to say; interested in and oriented to the methods and modalities of the past; is that they have a history; they work. they proved themselves. Do they know something that the people who write the 800 page textbooks on "economics" don't know? Probably not; but so what? When I got out of high school in 1960 I could take a quarter out of my pocket and buy a gallon of gas with it. Today, I can take the same 1960 Silver Quarter out of my pocket and buy a gallon of gas with it. Thus, the concept of savings becomes possible. It's not necessary for your savings account to "pay interest"; because you will profit from the millions of people;s monies which are deteriorating as their false savings accounts pay false interest. Store up your savings in monetary metals; and let other people confuse themselves with exciting new "ideas".

I'm lucky enough to know a few people living in China, and their translation of this isn't the big problem everyone seems to think it is. (Well, the usual haters.) It isn't an outright ban, its to prevent their banks going crazy making products for speculation based on BTC. Seems prudent given the proclivities of everyone over there to invest in real estate, etc...

Anyway, just another sovereign nation taking the steps to recognize what Bitcoin can do, without scaring the citizenry. I'm not surprised by the cautionary stance at all. Of course, Tyler can't help himself reporting when Bitcoin falls, its one of the few pure markets left that are allowed to do so.

Perhaps he is a bit nostalgic for when the equities would as well. Bitcoin sure makes some beautiful waterfall-like formations, you know, like S&P 500 used to before it got completely corrupted.

Haha, I knew it. You ARE a government apologist, Sudden Debt. Well, at least you came clean, finally. Must be a symptom of living in the EU, things are so fucked up there, you have to rationalize it somehow.

Wow, your hypocrisy just knows no bounds, does it? Now you are a fucking big government apologist? Do you have any principles at all, or do you just do whatever it takes to reinforce your "side", which is apparently completely defined by your portfolio?

Actually those look like benefits in this environment. Wise men diversify even slightly helps me sleep. TPTB want nothing sure but an ever changing set of rules none of us can get footing upon, think about why.

I'm sorry, I really don't care enough about what "the world" thinks about it to push my finger on the little button. What strange spasms pass through the mass mind. What next? Captain Crunch cerial box tops?

After Peter Schift, The Economist, Forbes and even Mr Bubble himself - Mr Greenspan - have called Bitcoin The Bubble it took the announcement from China to Crash it down from Double Top and parity level with Gold. It is important to note thatChina has been buying the record amount of Gold this year and has encouraged its citizens to accumulate it. Now China is explicitly warning its people about the dangers of Bitcoin speculative Bubble and effectively taking its out of official monetary system.
Now position of FED and Congress on Bitcoin is getting more interesting: do we have the Mexican standoff between Gold backed China, FED backed US Dollar and ... NSA, sorry Satoshi Nakamoto backed Bitcoin?
Gold should be waking up to the Bitcoin action after this Chinese move and its timing is very important as well: Gold is very close to retest this year low.
http://sufiy.blogspot.co.uk/2013/12/bitcoin-crashes-as-china-bans-financ...

A crash by rigged market standards. It is back above $1,000 and from the fiatleak site, it hasn't slowed down the fiat flow from China one bit (11:30p.m. Bejing). It's clocking about 4 times the U.S. flow right now and I had to set the flow rate from 20 to 50 to 100 just to get the alarm to quiet down.

The loudest zealots just crapped their pants. In my experience, once something gains an almost religious status among the common townspeople online, in the news, etc. Its time to run. BTC is a Momo traders toy and not a lot else.

Trust me this is not what “trying” looks like for a major government.If for whatever reason TPTB decide they are threatened by bitcoin it will look much different then this small mention by the Chinese.I think it will look like bitcoin losing all its value, when the US gov dumps tons they have been acquiring at times of low liquidity.It will be interesting to watch.

How is China's stance on Bitcoin any different then its official stance on Gold? they told their people they are free to buy it and don't want banks speculating with cheap credit to buy it. You can't buy rice or water in China with Gold but you are free to buy the commodity at your own risk.

From a headline perspective from reading other sites you would think its an all out ban but sometimes an official announcement gives clarity for people to understand the government position. As I read other sites interpretations of the news, this seems to be the not so obvious but apparently understood wink wink nod and all clear for wealthy people in China to continue buying.

While American publication and news mediums are gonna have a field day calling for the end of BTC, I like this opportunity and want to take this pullback to grab some. 20% down move seems modest for BTC, unfortunately bc its impossible to move money quickly enough into any exchanges I am relegated to the daily buy limit of 10BTC at coinbase for an immediate transaction.